Zune priced to match iPod, use Microsoft Points

Priced at $249.99, the Zune will ship on November 14. Microsoft will lose …

After months of speculation, Zuneday is here. Microsoft is launching its "socially integrative" music player and marketplace on November 14, debuting the Zune player at $249.99 in the United States. Will consumers see the 30GB Zune as a deal compared to the $249.00 30GB iPod? Time will tell, but Microsoft didn't make any plans to position this as a bargain device. Songs are priced at 99 cents (effectively, more on that below), and music subscriptions are $14.99. The music pricing itself is hardly a surprise. The labels have about zero interest in a music price war, and are likely not going to let that happen.

The predictions of a $225 dollar price point for the Zune player were wrong, but they were merely guesses that some publications decided to dress up as coming from reliable sources. The thinking seems to have been, "if Apple is at $249, Microsoft will price it lower ROL Crapple ROL." Or something like that. Needless to say, it was wrong, but we can expect plenty of conspiracy theories in the coming days.

There will be plenty of talk about what Microsoft is losing on each player sold. Microsoft doesn't have the buying power Apple has, and the device has a larger screen and built-in wireless. Apple is presumably turning a profit on the 30GB iPod, but Microsoft is losing a bit on the Zune player. Scott Erickson, Microsoft's senior director of product marketing for Zune, told Reuters that that effort is "not going to be profitable this holiday, but the Zune project is a multiyear strategy."

Accessories aplenty

The Zune player might be selling at a loss, but hey, that's why the Olympian gods invented accessories! Here's the honor roll:

You can also purchase accessories individually. For example, the car charger is $24.99 sold separately, and the sound-isolating ear canal "headphones" are $39.99. As with the iPod, accessories carry big potential profits.

99 cents a song or 79 "points"

The real surprise from today's announcement is the tie-in with Microsoft's point-based marketplace economy. Born in the Xbox Live Marketplace, "Microsoft points" are credits that are purchased for spending within the marketplace system. Points are priced differently throughout the world, but in the US a point is currently 1.25 cents. Microsoft's Zune Marketplace will sell individual songs for 79 points, which translates to 99 (98.75) cents.

The Marketplace tie-in is a sure sign that Microsoft wants to build upon the points-based ecosystem. The question is, why? Points-based systems are "good" because they obfuscate the real costs of things. Quick: is 700 points a good price for an album? There's a reason why theme parks love to use things like "Disney Dollars." Related to this, points-based systems are also good for parents who want to give their kids allowances. Buying 2000 points may be preferable to handing Jimmy the Chase Visa.

Another more intriguing possibility is gaming. Just as Apple's new 5.5G iPods play games, the Zune is probably headed this direction as well. Without a doubt the Xbox Live Arcade is stocked with the kinds of games that would do well on a mobile player (namely, Zuma, Bejeweled, etc.). Will we see the option to plug a device into the Xbox 360 to sync up games? You never know, but keep in mind this one important strategy from Microsoft: the Game Studio. The company's push to get homebrew games both on Windows Vista and the Xbox could play well for the Zune, or a second-generation device to follow. Apple has already made a move in the gaming department, and we can't imagine Microsoft sitting there without a plan.

And let's be even more speculative here. The platform approach at Microsoft is an old one. With Vista coming with Media Center capabilities present in most consumer versions of the OS, the tie-ins will likely also include the ability to manage videos. In this way, the Zune may become the portable piece of the Microsoft platform, flanked as it were by Windows Vista and the Xbox 360.

Before all of that, of course, Microsoft will need to sell a few of these puppies. Is this the secret sauce that the company needs to become a true entertainment powerhouse?

Ken Fisher / Ken is the founder & Editor-in-Chief of Ars Technica. A veteran of the IT industry and a scholar of antiquity, Ken studies the emergence of intellectual property regimes and their effects on culture and innovation.